Sims sees green in local efforts to cut emissions

County could sell its success on climate commodities market

ROBERT MCCLUR, Seattle Post-Intelligencer

By ROBERT MCCLURE, P-I REPORTER

Published 10:00 pm, Monday, May 15, 2006

County Executive Ron Sims wants King County to join the Chicago Climate Exchange, a market in which the commodity is the reduction of greenhouse gases.
Photo: Gilbert W. Arias/Seattle Post-Intelligencer

There was talk of efficient use of capital. Of commodities markets and futures. Of being first to take advantage of emerging trends.

But the people doing the talking on Monday weren't high-roller commodities traders. Not yet, anyway. They were greenies -- environmentalist government leaders who want King County to become the first county in the nation to join a national market to buy or -- if they are lucky and good -- to sell credits for helping to curb global warming.

So, in short, the same guys talking about capital and commodities markets in one breath were exhorting in the next breath the need to "think globally, act locally."

King County Executive Ron Sims launched a push Monday to commit to mandatory reduction of the county government's production of gases that aggravate climate change.

"Global warming ... affects our economy, the way we live, the future and the future of our children," said County Councilman Larry Phillips, who promised to help shepherd the proposal through the council. "King County has the chance to lead the way to effective solutions."

The proposal would make King County the first county to join the Chicago Climate Exchange, or CCX. It is North America's only commodities market in which the commodity is reductions in carbon dioxide, methane and other gases released by modern society that scientists say are causing the planet to heat up unnaturally.

Launched in 2003, the premise of the market is this: Every company or government that signs up promises to reduce its production of greenhouse gases by 6 percent between 2000 and 2010. Every year a certain reduction is required, depending on when the company or government joined.

If a company can't make its goal one year, it buys a credit from another entity that beat the required reductions. Economists -- and increasingly, market-savvy environmentalists -- praise the system because it worked to reduce sulfur dioxide from power plants in the 1990s.

However, for now, at least, the climate-exchange credits don't cost very much. And because there is no federal requirement for all companies and governments to reduce greenhouse gas production -- as there was for sulfur dioxide -- the market remains a voluntary one.

It also remains a relatively small one, with just 177 traders. Those members range from a Washington farmer who figured out how to capture methane in cow dung to Ford Motor Co., a founder of the exchange.

In addition to Ford, those 177 members include the likes of Du Pont, Motorola and IBM as well as the state of New Mexico and a handful of cities including Chicago, Portland, Oakland and Berkeley.

All together, the members represent about 4 percent of the United States' greenhouse gas production, and about 8 percent of the industrial emitters.

Criticism of the exchange so far has been mostly that it isn't mandatory and is therefore small-scale.

Monday the price to make up for emitting a metric ton of greenhouse gases was $3.70. By contrast, in Europe, where the law mandates reductions, the price was running in the high $30s recently, said Madison Hall, a longtime commodities trader who is studying the CCX concept as a graduate student at Michigan State University.

Why would anyone sign up if it's not mandatory? For one thing, many anticipate that the federal government will eventually mandate cutbacks, even though the Bush administration has steadfastly shunned the idea.

"The first to the market is rewarded," Hall said. "If you're the first to create this relationship, to show goodwill, to educate your vendors, to educate your shareholders, people see that you are ahead of the risk."

King County expects to be able to sell credits. Details remain to be worked out with the CCX, but the county has been taking steps to reduce its contribution to climate change for years, said Jim Lopez, deputy county executive. And if the county ends up having to buy credits, for now at least, that's not very expensive.

The county expects to reap credits for projects such as preserving 100,000 acres of forest in eastern King County, which traps carbon dioxide, a greenhouse gas; land-development policies that discourage suburban sprawl; and capturing methane from the county's Cedar Hills landfill.

Other projects already in the works are projected to make the picture look even brighter, climate-change-wise, for the county. They including luring an additional 60,000 riders a day to the county's bus system, protecting another 100,000 acres of forest, and more use of climate-friendly transportation.

Sims recently issued orders that the county start working to use 50 percent renewable energy for the county's non-transportation needs by 2012; and to use 50 percent renewable energy across the board, including transportation, by 2020.

King County should get in on the action at the exchange to help to write the rules early on, Sims said.

For example, the county wants to get credit when it puts additional buses on the road because that theoretically means a lot of cars are staying home. However, under the way the exchange's rules are written now -- for businesses -- if the county puts an extra bus on the road, that's extra emissions it has to make up for.

Similarly, the county has agreed to buy the development rights to about 100,000 acres on the Snoqualmie Tree Farm, but there isn't a way in the current set-up to get credit for that.

"There is a robust package of things we've already done," Sims said. "The key is: How do you measure that?"

Richard Sandor, the former chief economist for the Chicago Board of Trade who now serves as executive director of the climate exchange, said he wants ideas from King County. But in the end, he said, the emission reductions have to be proved and audited.

"We're very anxious to have them join," Sandor said. "We are a membership-driven organization and to the extent they have creative and innovative ideas ... there may be many things we can learn from the county."